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Capital budgeting decisions are among the most important decisions that a public financial manager makes. The traditional methodology for determining whether or not such an investment should be made is known as the discounted cash flow method. This method, unfortunately, does not capture efficiently the benefits of flexibility that often accompany capital budgeting decisions. This paper discusses the concept of real options and how the public sector managers can employ this relatively new technique to better value their capital budgeting opportunities. We argue, both through financial theory and through examples, that employing real option modeling in public sector capital decision-making will improve the efficacy of capital budgeting decisions.

This article focuses on a set of issues concerning unemployment insurance costs. The effect on unemployment insurance costs of variables under the control of the state legislature, such as the maximum benefit amount paid per week to unemployed workers, is analysed, as are the problems of abusing the system through “lay‐off” management and the topic of underemployment. The main policy thrust of the article is to argue that there are likely to be important trade‐offs between liberal benefit policies which typically increase business costs, and long‐term employment opportunities. Therefore, liberal policies towards the unemployed need to be offset by other business cost reductions in order to allow individual states to remain desirable locations for new business capacity. The legislature′s role in this process is argued to be of crucial importance.

This article is primarily concerned with nuclear armament and its relationship to the social economy. Nuclear armament is only a part, though clearly an important part, of the defence issue. The article begins with an introduction to the defence problem. It then moves on to the issue of ethical conduct and defence policy. The article then concludes with an analysis of the problems created by the relationship of defence decision makers to the anti‐nuclear arms movement.

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the audited end of year financial reports for thirty midsized US cities. The analysis focuses on whether and how quickly and how extensively revenue and spending directions from past years are altered by recessions. A seven year series of Comprehensive Annual Financial Report (CAFR) data serves to explore whether citiesʼ revenues and spending, especially the traditional property tax and core functions such as public safety and infrastructure withstood the brief 2001 and the persistent 2007 recessions? The findings point to consumption (spending) over stability (revenue minus expense) for the recession of 2007, particularly in 2008 and 2009.